SANTIAGO (Reuters) – Chile’s central bank revised its forecast for 2022 economic growth on Wednesday, dropping it to a range of 1.0% to 2.0% from an estimate of 1.5% to 2.5% in December.
“The economy will expand at rates below its potential in 2022 and 2023, with contractions in private consumption and investment,” the central bank said in a statement.
It also predicated that annual inflation would reach 8.2% this year, above the central bank’s tolerance range and up from a previous estimate of 4.5%.
The central bank said the rise in consumer prices was a response to the “excessive increase in spending” in recent quarters, which was supported by COVID-19 stimulus programs.
On Tuesday, the central bank raised its benchmark interest rate by 150 basis points to 7%, as it rapidly withdraws the monetary stimulus that followed the start of the pandemic in March 2020.
“The rise in the Monetary Policy Rate (MPR) has been fast and significant, but the risks of convergence and inflation persist,” the central bank said.
It predicted, however, that “inflation will begin to converge to the target in the two-year horizon” in the latter part of 2022.
The report also estimated that private consumption and gross fixed capital formation will contract in the 2022-2023 period.
The price of copper was also adjusted to $4.35 per pound, up from the previous forecast of $4.05. Chile is the world’s largest copper producer.
(Reporting by Fabian Cambero and Alexander Villegas; Editing by Andrew Heavens and Paul Simao)